22 yr old with zero history

Discussion in 'Credit Talk' started by Licensed, Jul 7, 2011.

  1. Licensed

    Licensed Member

    Hello, I am new here.

    I am a recent college graduate starting at a decent job in a month ($70k). In college, I never got a credit card but I did pay my rent and bills on time 100% of the time for 4 years. I never got a credit card because I dont like the idea of being in debt if I dont have to. If I had a credit card I would just pay it off immediately for example, so it is the same as my debit card. I graduated college 100% debt-free, and never got a loan. I bought my motorcycle used with cash, and my parents bought my car.

    Now that I graduated I want a credit card for grown-up things that require credit cards, as well as thinking ahead for a future car loan or mortgage which requires good credit. However, I am still no fan of credit cards.
    I went ahead and applied for a "Thank you" card at CITI and today I found out it was declined due to lack of credit history. When I tried to get my free annual report, they all said I have no credit. I was shocked to see that nothing at all to this point (i am 22 years old) has counted towards my credit history, but I have accepted it.

    Being an engineer I am honestly looking for the most efficient/fastest way to get just good enough credit history to qualify for a real credit card. I have read about the FICO scores and such and they seem to just be mathematical algorithms, and every time theres such a case, theres a way to maximize/exploit them.

    -How am I supposed to build credit with no credit? In other words, what exactly does count towards my credit history, and from that list which are actually applicable to a 22 year old with no credit?
    -I only know of "secured credit cards". If this is the best way to build my credit to the point where I can get an actual real unsecured credit card, which company should I go with? How much money should I put into it, and how much should I use every month (I read 25% of credit available at most?)? Should I get more than 1 secured credit card for this time period? How long will it ultimately take for me to have enough of a credit history to get a normal credit card?


    Example plan of action:

    Acquire ___ secured credit cards. Deposit $_____ into each. Spend 25% of each on whatever, pay ASAP at end of month. Repeat for _____ months. How do I know when im ready for a real card?



    Thanks.
     
  2. Licensed

    Licensed Member

    Anyone know where I can get a $500 unsecured CC with zero credit history?
     
  3. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Can your parents add you as an Authorized User on one of their oldest credit cards in good standing? That will immediately give you some credit history and a credit score.

    If you can't get approved for an unsecured card quite yet, go for a secured card like the Capital One Secured Card. Keep your credit utilization around 10%, no more than 30%, and after 6 months or so you should be able to upgrade to a regular unsecured credit card.

    Also, here's an article I wrote about building credit when you have none. This should help point you in the right direction:

    How to Build Credit from Scratch
     
  4. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Check out the Orchard Bank cards: Orchard Bank credit cards

    They are the most popular these days, but prepare yourself for high fees until you can upgrade.
     
  5. Heather L

    Heather L Well-Known Member

    I agree with Josh, a great way to start your credit is to have a family member or friend add you as an authorized user to one of their existing credit card accounts. Make sure the credit card account has at least two years of perfect payment history and can maintain a low balance (10% of the credit limit). Since 35% of your credit score is based on your payment history the longer the payment history on the authorized user account the better. I have personally seen someone with a blank credit report add one authorized user account and get a 820 credit score.

    Of course once you apply for your own credit accounts your credit score will drop down until you are show good payment history on your brand new credit account. On average it takes about 24 months of perfect payment history on a new credit card account to see positive impact in your credit score. Starting at the top and working your way down is a better way to start your credit. Thanks! Heather with BoostMyScore.NET
     
  6. Licensed

    Licensed Member

    Other boards have been telling me to go with 2 different cards from Credit Unions as opposed to CapOne or Orchard, what is the difference in building credit / "growing" with the card, and is 2 better than 1 for building credit?
    I have been declined by CITI for an unsecured CC before I knew anything about credit, and wasted a hard pull there because I have no history in the first place.
    I read "piggybacking" doesnt work any more on "howstuffworks", how true is this? Apparently my cousin who is under my aunt's CC for some time now (has her own CC extension with her name on it, but it is my Aunt's account) got denied recently for a CC from somewhere. Does this mean the credit history on that line is not good enough on for piggybacking purposes, and therefore I shouldnt even bother asking her to AU me?

    Thanks
     
  7. debteye

    debteye Member

    Obtaining a secured credit card & also being an authorized is a great starting point. Another way you can obtain credit (although I'm not a fan of this method), is to apply for a department store card. These often come with ridiculous interest rates, but just don't carry a balance and you're good to go! Best of luck!
     
  8. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    If you want to go with a CU, that would be fine too. The effect on your credit scores will be the same. Having 2 cards will of course help you build positive payment history faster, which accounts for 35% of your credit score.

    Anyone that tells you piggybacking doesn't work anymore is clueless about the FICO scoring model. It still works, and parents and spouses continue to add their significant others and children as AUs to cards all the time to help them build credit. The fact that your cousin got denied for a card could mean a lot of things, but I don't know enough about his credit history to answer your question.

    Here's an article I wrote about piggybacking a few years ago which explains why it still works: Piggybacking: What's the Deal?
     
  9. Licensed

    Licensed Member

    Very good summary of the piggybacking situation. I do believe it still probably works. Now I just need to find someone.. Will this alone give me a score instantly, and good enough to apply for an unsecured card and maybe start a little ahead than the secure card method on my own?
    How long from the time that I am made an AU, to the time that I actually show something on TU EQ and EXP so I can go ahead and apply?

    Thanks.
     
  10. debteye

    debteye Member

    Once you're added as an AU, I've seen accounts being reported in about a month, but shouldn't take more than 2 months.

    Once your account is showing up, assuming that these accounts are in good standing with a long credit history...you should see results.
     
  11. Licensed

    Licensed Member

    Turns out my cousin is an AU for 3 of my aunt's cards with 0 late payments, 6 yr avg history, and decent limits. She also has 0 inquiries. This is all she has on her report, and she is 20. Her score is therefore a 753 FICO with the only negative being a 44% utilization which will go down as I helped my aunt double her CL's today.
    I went ahead and ran her (my cousin with her 753 FICO score) through the CapOne and Orchard pre-selection sites and to my surprise all they offered was a secured card from Orchard which is the same they offer me with my 0 credit. It is as if they are omitting the AU's, which is all she has. Where should she go for an unsecured CC with a 753 that is 100% AU-based?
    My aunt has gone ahead and added me as an AU to two of those well-standing cards. If/when my score is in a similar situation as my cousin (700's) due to this, who should I try to get an unsecured CC with and why did my cousin get denied with a 753 through pre-selection?

    Thanks.
     
  12. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    She's in the excellent credit range with a FICO score above 750, so it's tough to say exactly why they're only offering secured cards. I doubt it's because her credit history is based primarily on AU accounts. The high credit utilization would likely be more of an issue to most lenders.

    I would be really surprised if she couldn't get approved for a decent unsecured credit card from any of the major credit issuers or a local credit union in your area. Is she a student too? If so, I would take a look at some of the student credit cards from Discover, Citibank, or Cap One first. If she doesn't have any hard inquiries, I think it's worth giving one a try before going the secured route.
     
  13. Heather L

    Heather L Well-Known Member

    I have seen success when applying for a Nationwide Bank credit card with authorized user accounts on credit report. I agree with Josh, having your utilization at 44% might be why you are only getting approved for secured cards. You could also try USAA or Navy Federal Credit Union, I have heard that you can apply for a CC through them without having a family member in the military. Thanks! Heather with BoostMyScore.NET
     
  14. Licensed

    Licensed Member

    Why are USAA and Navy favored over other CU's and banks?

    My cousin still has a 753, is 44% that bad? She might have an 800 if it wasnt for that! Im worried now since my aunt is putting me under a couple of those CCs and I have no control over her utilization lol.
     
  15. Licensed

    Licensed Member

    So I just used up my free annual report from Experian and I actually have a file now! I am showing the BoA card from 2003 that has never been late, but not the CHASE CC that my aunt also AU'd me for. I had told her it was odd that CHASE didn't ask for my SSN, and this is probably why it isn't showing up. However, the CHASE account is 2 months old, cutting my average acct age in half etc. Is it to my advantage to keep the BoA only and not try to get the CHASE to report?
    I also tried to get a FICO score from myFICO.com and it was denied so I called and they explained it will take like 6 months to actually have a score, which makes sense. Does this mean I have to wait 6 months to apply for an unsecured CC or now that im actually reporting could that be enough to try something? I probably have 0 inquiries though so I wouldn't want to waste them.

    Thanks.
     
  16. Licensed

    Licensed Member

    Also, anyone know which secured cards actually graduate into unsecured and which are stubborn? In case I need to follow this route.

    Thanks.
     
  17. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    I've heard good things from people that have used the Capital One Secured card in order to upgrade to another unsecured cap one card. Credit Unions are generally pretty good about this as well.
     
  18. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Yes, you'll need to have an active account on your credit reports for at least 6 months before FICO will calculate a score for you. I think it would be wise to wait until you have a FICO score before you start applying for cards. Also, I wouldn't add yourself as an AU on the Chase card if it's only 2 months old. You only want to be added to cards with a lot of history and low credit utilization.
     
  19. Licensed

    Licensed Member

    Great, I hope CHASE never reports then. This was done saturday and only BoA asked for a SSN, hopefully CHASE messed up because this would cut my AAoA in half. Ill check weekly on this.

    I think i'm willing to spend a hard pull on an high-probability unsecured CC from a CU (still researching this), and get a secured CC if that fails. Does applying for a secured CC imply a hard pull? This way in 6 months Ill have a FICO and a second card of my own to qualify for better CCs as I suspect that AU-only scores arent optimal as show by my cousin's AU-only 753 which gets denied by pre-selectors.

    Thanks.
     
  20. Heather L

    Heather L Well-Known Member

    I mentioned USAA and Navy FCU cards because I have a few friends that have called to apply for those cards and they have had great success.

    If your aunt would pay down her credit cards down to 10% or 20% utilization you would see a increase in your credit score. There are companies out there that you can purchase AU accounts as well. They can guarantee that the balances on their cards and 20% or less utilization. Make sure you do your research if you purchase from a company instead of using a family member for AU accounts. Thanks! Heather with BoostMyScore.NET
     

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